In our latest quarterly survey of bank risk professionals, we found a strong negative outlook for the housing sector. Of course, this isn’t new. It continues a trend we’ve seen for a long time.
While 18% of respondents expected mortgage delinquencies to decline over the next six months, 46% expected the number to rise. Similarly, 22% of bankers surveyed expected delinquencies on home equity lines to decline while 46% expected delinquencies to rise.
Other data support this negative outlook. Average home equity in the U.S. has dropped from 61% in 2001 to 38% today. With roughly 11 million homeowners under water on their mortgages, it is very hard to see the light at the end of the tunnel. It is likely to take years to work through all the troubled mortgages that are still on the books.